Campaigners claim we are heading for global meltdown. Business leaders have made frequent proclamations they have taken note. After all, so the theory goes, we all of us suffer the consequences.

One of the hottest climate change battles has been taking place over the relationship between fossil fuels and economic growth. Can fossil fuel use (and greenhouse gas emissions) be cut without causing serious economic damage? According to some data, slowing or reversing emissions growth might not compromise economic health.

Companies like BP and Royal Dutch/Shell – often praised for their stance on Corporate Social Responsibility (CSR) – have taken the lead by promoting research in renewable and clean energy sources, such as wind power, hydrogen fuel cells, geothermal and solar energy. Even if BP's much-heralded attempt to rebrand itself as "Beyond Petroleum" seems to have backfired.

This 'greening' of business, with the advent of CSR; the pressure from environmental agreements, such as the yet-to-be ratified Kyoto Protocol; public pressure; carbon trading; the search for renewable energy; and 'ethical investment', is now supposed to be well underway. Or is it?

The facts surrounding global warming are no longer in serious dispute. In the past two decades scientists have measured the 10 hottest years since international records began (in 1860). For a long time, the cause of that change gripped the scientific community. It is now widely accepted that greenhouse gases, first detected during the Industrial Revolution and due in large part to the burning of coal and oil, are largely to blame. And that in turn has put the focus on the carbon dioxide (CO2) emitters, particularly larger manufacturers and fossil fuel companies. Investors are starting to demand that such organisations prepare for a future in which climate change is going to play an increasingly large part.

So how have they faced up to the challenge? Not very well, according to a recent report prepared by the Investor Responsibility Research Center (IRRC) in Washington, D.C. Corporate Governance and Climate Change: Making the Connection states that many of the world's largest companies are doing a poor job of preparing for the business impacts of global warming.

Most of the 20 corporate giants analysed, including leaders in the oil, auto and utility industries, failed to disclose enough about the financial risks they face from climate change to their investors.

None of the companies produced financial estimates of the potential costs or benefits of this change (including more extreme weather, and the financial impact of changing regulations on carbon emissions) and eight companies, including General Electric, General Motors and ExxonMobil, made no mention of climate change at all in their filings last year with the Securities and Exchange Commission. Even those that did tended to make "miniscule and vague" disclosures.

"We are not talking about issues that are 50 years out," says Mindy Luber, executive director of the Coalition for Environmentally Responsible Economies (CERES), which commissioned the study. "We are seeing inadequate board reviews in many, many companies."

Dan Cogan, deputy director for social issues at the IRRC, adds that North American firms in particular seem to be discounting the threat of climate change to their businesses. BP and Shell were the only corporations in the report credited with a full response to climate change issues. By contrast the worst performers, including Exxon, G.E. and TXU, an energy services concern, reported just four of the practices the report identified as prudent.

Cogan believes that while better disclosure could help investors – especially those with long-term horizons, such as pension funds – it could also stimulate companies to move much faster to reduce CO2 emissions. He also points out that toxic emissions plummet in the US when they have to be reported publicly to the Environmental Protection Agency.

Some organisations have already talked of a "carbon economy" opening up, in which new opportunities and innovations are presented by climate change. New products and technologies will have to be developed (beyond nuclear power, which is seen as tarnished) which will "likely influence technological development in all sectors of the economy for the next 50 years," according to the Edinburgh Centre for Carbon Management.

We are also about to witness the emergence of voluntary and mandatory greenhouse gas emissions trading schemes on both sides of the Atlantic. The creation and rapid growth of emissions markets seems inevitable. As a consequence, the need for greenhouse gas management for companies in Europe and America is imminent.

But a report last year by the Carbon Disclosure Project (CDP) – which was set up to provide information to investors and funders – says there is still an acknowledged 'knowledge deficit' concerning the financial impact of climate change. As well as in the emission-intensive sectors, where greenhouse gas pollution will be regulated, the report warns of climate change impacts on other industries, from telecommunications to real estate. Some estimates have suggested such costs could reach £100 billion over the next 10 years. Extreme weather events affected the turnover for many companies in 2002, and the report predicts similar patterns for this year, advising business to protect themselves.

One of the companies most heavily criticised by the IRRC, ExxonMobil, has dismissed comments that it would lose long term investors due to its stance on climate change. But this type of attitude is increasingly being challenged, says Tessa Tennant, CDP's chairwoman.

"We’re talking about shareholder value and ‘carbon competitiveness’. Companies failing to take the messages of this report seriously are likely to hear from their shareholders," she says.

There is also a threat that legal action may be taken against socially and environmentally unconscious industries. In January three US states announced a plan to sue the Environment Protection Agency because it has not enforced CO2 regulation; such a case would doubtless have repercussions for business.

Governments have weighed into the fray. In October 2000, in a keynote address to the Confederation of British Industry (CBI), Prime Minister Tony Blair told business leaders: "I am issuing a challenge, today, to all of the top 350 companies to be publishing annual environmental reports by the end of 2001."

But more than three-quarters of the top British businesses completely ignored Blair’s ‘challenge’. Government figures indicated that only 79 of the top 350 companies produced substantive reports on their environmental performance by the deadline, and that only 24 of the other companies in the FTSE 350 had indicated their intention to do so. Ten per cent of the remaining top 350 companies mentioned the environment in their annual reports, but in many cases it was given only a few short paragraphs.

Business leaders and investors should be concerned, however. If not only by global warming, then by the new legislation it has brought with it. The European Commission has just unveiled tough proposals to cut emissions of particularly potent greenhouse gases by a quarter before 2010. A panoply of other national laws are coming into effect in many countries. And if Russia ratifies the much-heralded Kyoto Protocol of 1997 – in which the developed nations agreed to limit their greenhouse gas emissions to 1990 levels – it will come into international effect.

It is the battles surrounding Kyoto (many blame behind-the-scenes lobbying by ExxonMobil for the US decision to pull out) that have caught international attention. However, regardless of what happens there, we are entering a new era, says the industry environmental forum, the World Business Council on Sustainable Development (WBCSD). This will be a "carbon-constrained world where carbon emissions into the atmosphere will come to carry a cost. But we still lack an agreed-upon global framework to address this problem, which is creating uncertainties and slowing down action."

WBCSD has introduced a corporate accounting and reporting standard that helps companies identify, calculate and report on their greenhouse gas emissions. And the consensus, at least here in Europe, seems to be that the deployment and diffusion of environmentally friendly technologies is critical to sustainable development.

'Green power' technologies have long been overlooked by corporate energy buyers. Generally viewed as immature and costly, green power traditionally has been deemed unattractive for large-scale energy purchases by companies operating in competitive markets. But that perception is changing. Some major corporations are paving the way for the creation of a cost-competitive market for green power, by more aggressively pursuing renewable and clean power options.

For instance, in 1991, Toshiba set up a Corporate Environmental Protection Council, to help develop environmental initiatives across the group. The aim is to lower CO2 emissions 25 percent by 2010 and to work towards zero emissions by recycling all waste generated. In addition, two of IBM's US facilities now buy more than 5.4 million kilowatt hours of wind-generated electricity every year. And even General Motors, criticised in the IRRC report, recently announced two projects that will directly use landfill gas as fuel for powerhouse boilers, and to generate electricity.

There are other, smaller, contributions taking place across the business environment. Cultura, a travel operator offering component travel in Europe, is enabling customers to make their holiday flights "Carbon Neutral" with an organisation called Future Forests. Future Forests calculates CO2 emissions from airline travel, and balances them by planting trees.

1E, a UK consultancy and software developer, is working to highlight the the levels of CO2 emitted by personal computers (PCs). According to the research, a single PC in use or on standby 24 hours a day emits up to one ton of CO2 every year (estimated to rise to a colossal 3.7 million tons a year by 2020). "The money being lost is nonsensical and the damage to our environment appalling," says Sumir Karayi, 1E's founder and CEO.

At a presentation in Houston this March – in the virtual back yard of ExxonMobil – Shell chairman Sir Philip Watts added his thoughts to the debate: "We can't wait to answer all questions [on global warming] beyond reasonable doubt", adding "there is compelling evidence that climate change is a threat".

"We know that greenhouse gas emissions from human activities...largely burning fossil fuels...bring about long-lasting atmospheric changes likely to affect climate. And our world does appear to be warming," he said.

Shell has been pushing ahead with its own investments in wind, solar and other renewable fuel sources, even 'capturing' carbon emissions for resale to other industries. But it will be only by the middle of this century that renewables take a serious grip on energy supply, possibly providing a third of the world's needs by 2050. There is no quick fix before renewables can offer affordable mass energy, believes Sir Philip.

So change is coming, if slowly. Wind power is now 80 percent less expensive than it was 20 years ago, according to the World Resources Institute report, Corporate Guide to Green Power Markets. Alison Hill, of the British Wind Energy Association, argues that: "Renewables are big business and none more so that wind power, the fastest growing energy sector worldwide."

Recycling is on the increase, too. Landfill sites are responsible for a quarter of methane emissions, a greenhouse gas 20 times more harmful than carbon dioxide. The recycling industry is already worth £12 billion in the UK alone, and new policies and legislation are driving it forward. Recent figures suggest that it is set to expand to nearly £30 billion in the next 15 years. In fact, Europe's first recycling equity fund is being launched by WRAP (Waste & Resources Action Programme) in October.

But will alternative sources of energy become economically viable and available quickly enough to stave off environmental collapse? Is it governments, not business, that is to blame here – or are the two intertwined?

The world's richest countries are failing to curb the pollution that is causing global climate change, says a recent United Nations report. Emissions from countries such as the United States, Canada and Australia grew in the 1990s despite their promises to lead action to reduce the problem.

And based on projections provided by the governments themselves, the United Nations anticipates that the combined emissions of Europe, Japan, the US and other highly industrialised countries could grow by 17 percent between 2000 and 2010, despite domestic measures currently in place to limit them.

A spokesman from environmental pressure group, Friends of the Earth (FoE) adds: "Rich countries with rising emissions should be ashamed – they are threatening the lives and livelihoods of millions of people. The United States and Australia should be especially ashamed as they have refused to even ratify Kyoto."

Even here in the UK, seen as more proactive than most, over a third of our electricity is produced by burning coal in power stations, which produces two to three times more CO2 than gas.

Even the UK's most eminent climate scientist has accused Tony Blair of failing to stand up to George Bush on the issue of climate change. He says global warming is as great a threat to the world as weapons of mass destruction.

In a blistering attack on George Bush for "an abdication of leadership of epic proportions" and Tony Blair for taking no action for fear of offending him, Sir John Houghton, former head of the Met Office, has said: "Our long-term security is threatened by a problem at least as dangerous as chemical, nuclear or biological weapons, or indeed international terrorism: human-induced climate change. The parallels between global climate change and global terrorism are becoming increasingly obvious".

The environmental campaigner and author, George Monbiot, believes that global demand for oil is likely to outstrip supply within the next 10 or 20 years.

"We live in a dream world," he says. "Our dreaming will, as it has begun to do already, destroy the conditions necessary for human life on Earth. We are not contemplating the end of holidays in Seville. We are contemplating the end of the circumstances which permit most human beings to remain on Earth. Like crops, humans will simply wilt in some of the hotter parts of the world."

Whether that happens, or not, is partly down to the business community. The public consensus is that the time to act is now. How and with what means businesses and governments react, and whether the very essence of human life remains sustainable, is a question now very much in the balance.